Corporate (Group)
Horizontal Strategies
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Template for: Corporate (Group) Horizontal Strategies
The purpose of this section is to highlight how the
corporation (group) plans to compete in terms of how the business units will
coordinate their activities.
According to Michael
Porter, "Horizontal strategy is a coordinated set of goals and
policies across distinct but interrelated business units. It is required at the
group, sector, and corporate levels of a diversified firm. It does not replace
or eliminate the need for separate business units and business unit strategies.
Rather, horizontal strategies provide for explicit coordination among business
units that make corporate or group strategy more than the sum of the individual
business unit strategies. Without a horizontal strategy, there is no convincing
rationale for the existence of a diversified firm because it is little more than
a mutual fund. Horizontal strategy, not portfolio management, is thus the
essence of corporate strategy."
The corporate (group) goal is clear: to ensure that interrelationships
yielding a competitive advantage are exploited. The result is independent
business units that are connected by organizational devices and a set of shared
values. Horizontal strategies can be divided into four broad categories:
horizontal structure; horizontal systems; horizontal human resource practices;
and horizontal conflict resolution processes.
Horizontal Structures
Horizontal structures refer to temporary or permanent organizational
entities that cut across business unit boundaries, supplementing the business
unit structure. For example, establishing centralized cost centers
(horizontal units) to perform one or more activities for the benefit of two or
more businesses.
Horizontal Systems
Horizontal management systems have a cross business unit dimension,
typically in areas such as planning, control, incentives, and capital budgeting.
Horizontal Human Resource Practices
Horizontal human resource practices facilitate business unit cooperation,
such as cross-business unit job rotation, management forums, and training.
Horizontal Conflict Resolution Processes
Horizontal conflict resolution processes refer to the ability of corporate
management to settle disputes between business units.
Many organizations are in a constant state of musical chairs shifting between
centralizing and decentralizing activities. Regardless of the level of
decentralization, the key goal is to align the horizontal units with the needs
of the businesses. In the final analysis, the success of the company rests upon
the successes of the SBUs, regardless of how many or how few people actually
report to the SBU managers.
At the extreme, even if nobody reports directly to the SBU manager, the SBU
manager is still responsible for defining the competitive strategy of the
business and coordinating all of the activities performed by the various
horizontal units such that they all act in concert with the SBU's goals,
objectives and competitive strategy for achieving a long-term, sustainable,
competitive advantage.
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